Capacity Building for Nonprofit Organizations

Making Good Organizations Great

How you, as a donor, can help your favorite nonprofit become self-sustaining and achieve its mission

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What is Capacity Building?

Capacity Building Grants help strengthen the nonprofit organization itself, so that in the long-term, it is better able to sustain the programs we care about and make them ultimately more effective for the community

Institutional Operations

Programs

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Today’s Featured Capacities

Three kinds of capacity building services that can be critical to an organization’s wellbeing:

Leadership Development

Financial Sustainability

Program Effectiveness

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Relevant to Our Times:

The current economic climate has led to:

The flipside is that it has also given nonprofits an opportunity to become stronger:

By assessing it’s strengths/weaknesses Filling in its weaknesses and building on its strengths

Reduced Funding

Increased Need

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How Capacity Building Relates to you as a Philanthropist

If you…

have supported an organization over the years that is still in the same place of breaking even…

know of a great organization whose work you want to be sure lasts for years to come…

have a relationship of an organization that has been severely impacted by the economy…

A Grant for Capacity Building may be an ideal way to help that organization overcome today’s challenges and unleash its potential for long-term sustainability.

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Executive Service Corps: Leadership Development

Expert Capacity Presenters

Nonprofit Finance Fund: Financial Stability

Special Service for Groups: Program Effectiveness

nonprofitfinancefund.org ©2011 Nonprofit Finance Fund®

Nonprofit Finance Fund

Presented by

Karla V. Salazar, Director

Jessica LaBarbera, Director


May 6, 2011

Getting to Know Nonprofit Finance Fund

nonprofitfinancefund.org ©2011 Nonprofit Finance Fund®

Nonprofit Finance Fund: Where Money Meets MissionServed thousands of nonprofits and funders since 1980

CAPITAL ACCESS Nearly 30 years of experience as a 501(c)(3) Community Development Financial

Institution (CDFI) Create access to capital directly (e.g., loans) and/or strategic partnerships (e.g.,

Program Related Investment management, Philanthropic Equity, and Catalyst Funds)

New Market Tax Credits, $280 million in loans; $100 million in New Market Tax Credit deals; over $1 billion in capital leveraged

CONSULTING Over 1,000 consulting engagements and workshops in past 5 years Financial advisors and educators Collaboration/Merger specialists

Serving nonprofits nationwide from seven local offices Northeast: Boston, New York Mid-Atlantic: Philadelphia, Newark, NJ Midwest: Detroit West Coast: San Francisco and Los Angeles

All sub-sectors served: $300,000 to $50 million

“[NFF is]… arguably the most influential voice in the ongoing effort to reshape thinking and practice about nonprofit capitalization.” –The Nonprofit Times

9nonprofitfinancefund.org ©2011 Nonprofit Finance Fund®

NFF Addresses a Central Nonprofit Challenge

Why do so many nonprofits run into financial difficulties, despite their excellent programs, and what can we do about it?

Mission and Program

Capacity Capital

What you do and why you do it

Your ability to do what you do: Supporting infrastructure (e.g., people,

space, and processes)

What you have and how it is distributed: Assets, Liabilities and Net Assets


Educating our Sector to Move BeyondBreaking Even

Like any organization, nonprofits need to cover the ‘full cost’ of delivering programsTax Status vs. Business ModelFull Costs > Operating Expenses

Full costs include:10

10

1010

10

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Operating Expenses

Fixed Asset Additions

Debt Principal

Working Capital

Reserves

Depreciation


Five Steps that NFF uses to Assess a Nonprofit’s Financial Health

1. Profitability & Savings: Are costs covered? Are surpluses sufficient to pay for debt principal and facility or equipment purchases? Is the nonprofit generating adequate savings?

2. Revenue Dynamics: Where does the nonprofit’s money come from? Are revenue streams relatively reliable or at risk?

3. Expense Dynamics: Does management understand the differences between direct, indirect and full costs? Does management adjust costs in response to revenue shortfalls?

4. Health of Balance Sheet: Are the size, nature and distribution of assets, net assets and liabilities appropriate to support the organization’s business and programs over the long term?

5. Liquidity: Is there enough cash available to cover current obligations? How quickly do receivables convert to cash? How liquid are the nonprofit’s net assets?


NFF Financial Tools

Our financial tools are designed to help nonprofit management plan effectively during years of economic uncertainty and beyond.

1. Nonprofit Business Analysis (NBA) & Financial Situation Analysis (FSA)

2. Financial Management Tools: Cash Flow Analysis, Scenario Planning, and Program Profitability Analysis

3. Facilities Solutions: Systems Replacement Plan (SRP)

4. Nonprofit Finance Workshops & Clinic


1) Financial Expertise: Nonprofit Finance Workshops & ClinicNonprofit Finance Workshops Linking Money to Mission: A Balancing Act Facilities Projects: Funding and Financing Strategies Growth and Nonprofit Organizations: Achieving Impact and Stability

Financial Leadership Clinic What every nonprofit leader needs to know about the role finance

plays in supporting nonprofit mission and program An opportunity to bring key staff and board members together to

examine the crucial financial underpinnings of an organization A chance to gain in just two days:

A greater understanding of nonprofit finance Customized financial analysis of the organization An insider look at the financials of similar nonprofit

organizations


2) Nonprofit Business Analysis (NBA) & Financial Situation Analysis (FSA)

The NBA and FSA are an one-on-one consultation using proprietary financial analysis. It provides:

An in-depth examination of a nonprofit’s financial strengths and weaknesses

A fresh, independent perspective to help organizations balance financial considerations with program goals

Clear visuals and helpful tips to help an organization better communicate its financial situation to stakeholders

Clients benefit from: One-on-one collaborative engagement with nonprofit financial

experts Clear and easy-to-use reports, illuminating a five-year financial

picture Trend analyses, charts and recommendations to communicate

financial needs to stakeholders Technical assistance to reinforce lessons from the NBA


Program Profitability

Analysis

Scenario Testing

Explore strategic partnerships,

collaborations, mergers

Debt Consulting

and Access

to Capital

3) Financial Management Tools

Cash Flow Planning

Financial & Organizational Assessment


4) Facilities Solutions: Systems Replacement Plan (SRP)A Systems Replacement Plan (SRP) gives you a practical

plan to take care of your building for the next 20 years, so that it can continue to safely house your mission and programs

An SRP is an assessment of the 20-year repair and replacement needs and costs for a nonprofit facility:

Provides a comprehensive facilities analysis by engineers, architects or construction consultants

Forecasts the necessary replacement of specific systems and equipment, presuming routine maintenance

Details a year-by-year breakdown of proposed costs and savings

Who can take advantage of an SRP? Nonprofits that own buildings Nonprofits with a long-term lease that are responsible for all

repairs and replacement


Success & Ongoing Improvement

Execution

Planning & Decision-making

Communication

Education

NFF approach to working with a Nonprofit Organization to Achieve Sustainability

Understanding links between finance and mission success

Using data to better articulate mission needs

Translating what you’ve learned into short- and long-term actions

Integrating plans into day-to-day activities and organizational culture

Conducting continuous evaluation to leverage impact and adjust course

18nonprofitfinancefund.org ©2011 Nonprofit Finance Fund®nonprofitfinancefund.org


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Thank you!

To learn more about NFF: Visit our website: nonprofitfinancefund.org Sign up for news and updates through our website Follow us on Twitter! twitter.com/nff_news Contact us:

Karla V. Salazar Jessica LaBarberaDirector Director213-623-7001, ext. 2 213-623-7001, ext. [email protected] [email protected]

mailto:[email protected]


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Example of Nonprofit Finance Fund’s Work with a Nonprofit Client

• Korean Health Education Information & Research Center

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Who is KHEIR?

The KHEIR Center is a primary provider of critical linguistic & culturally-appropriate healthcare and human services support to the residents of Los Angeles and its neighboring communities. Annually, KHEIR Center offers over 30,000 Human Services case visits, 100,000 hot meals to seniors, and 10,000 patient visits in English, Spanish, and Korean.

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Recent challenges that KHEIR sought to address with the Nonprofit Finance Fund

One of the key programs for KHEIR, the Adult Day Health Care (ADHC) Center has faced an over saturation in the market for Korean seniors with fierce competition from private clinics.

Also, since the economic recession, there is a constant threat of the ADHC program facing elimination. Currently about 70% of revenue comes from ADHC.

The staff and the Board were in agreement that KHEIR should:

Diversify revenue streams by also diversifying programs and funding sources.

Develop a financial capacity building & sustainability plan, based on a worst case scenario of ADHC eliminations.

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KHEIR’s work with the Nonprofit Finance Fund

Through a “Scenario Planning Engagement” Exercise

KHEIR & NFF examined the fiscal and programmatic impact of a funding reduction to the Adult Day Health Care (ADHC) Centers on KHEIR

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Scenarios KHEIR explored with the Nonprofit Finance Fund

What if Scenario

Options Financial Impact #1

Financial Impact #2

Decision

ADHC is severely cut or eliminated

Minimal Adult Day Care or complete closure

Minimal Adult Day Care would require an additional revenue of $1.3 million/year to be sustainable

Use $1 million of existing reserves to help wind down ADHC (assuming full year transition is needed)

Utilize/ leverage funds to address housing needs for long-term community benefit.

Clinic focuses on attracting new clients

Increase marketing $$

Hire new employees

Bottom line improves by roughly $250,000 based on projected increase in client intake

Stay as-is, allow management to focus on other operational needs

Secure diverse revenue sources and clientele.

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Actions Taken by KHEIR as result of work with the Nonprofit Finance Fund

Adult Day Health Care Renegotiating lease Researching addition of a new patient group

(service language) Exploring federal programs for long-term

sustainability Identifying public-private partnership opportunities

for Assisted Living Facility

Clinic Identifying new revenue opportunities:

» HMO Contracts» Marketing Imaging Services to other

Clinics & Private Practices» Securing service contracts (Federal,

State & County)

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Replicating KHEIR-NFF Success: Who Else Can Benefit?

Organizations Reviewing Their: Long Term Sustainability Revenue Model Effectiveness (Individual Programs, Agency-Wide) Growth Potential

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Building a Learning Organization

to Increase Program Effectiveness

Special Service for Groups

Who is SSG?

Incorporated in 1952

Operates 20 programs

Address key issues identified as priorities by local grassroots communities

In last decade, SSG has excelled in developing and leading collaborative efforts with other community-based organizations

Today’s focus: SSG Research and Evaluation’s work as a capacity builder for program evaluations to increase program effectiveness

Why Important?

1) Boosts Program Effectiveness Nonprofits need to capture information about their

programs in order to manage it, learn from it and improve the future of the program.

2) Supports Fundraising Efforts Nonprofits need concrete information about the

impact of their programs in order to convey that they are effective to potential funders to increase funding for their programs.

Don’t organizations already know this?

Nonprofits are generally funded to implement and report on program completion

Organizations are rarely funded to evaluate their programs

Forfeits valuable lessons learned to make future programs more effective

Repeat the same mistakes over and over again Or miss the opportunity to replicate successes When could alternatively be getting better

and better

SSG as Capacity Builder

CCF contracted SSG in 2010 for an evaluation capacity building project called Building Learning Organizations.

The purpose was to help nonprofits conduct their evaluations—not only as a reporting mechanism—but primarily as a tool to:

Improve programs Achieve better outcomes Inform nonprofits’ organizational development

SSG Strategy with Nonprofits

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Feedback Loop

What SSG achieves with nonprofits:

Increase staff knowledge of program evaluation concepts and their importance and link those concepts to organizational learning and improvement

Increase capacity of nonprofit organizations to document and evaluate their outcomes and to use evaluation data to inform their organization’s development and programming

Integrate evaluation as a regular part of the organizational culture, and not external to - or independent of - the organization.

Kind of nonprofit that can benefit:

Characteristics of nonprofits that can benefit: ACCOUNTABILITY CHANGE: Used to compliance reporting but want to switch

to an outcomes-based model of accountability (measuring impact versus program completion)

ORGANIZATION DEVELOPMENT: Want to use data to support program improvement, fundraising initiatives and policy advocacy efforts

Characteristics of nonprofits that demonstrate readiness: Leadership buy-in Organizations that are trying to implement their strategic plan that includes

evaluation Young or growing organization that does not yet have set infrastructure – more

fluid and adaptable to changes New or revamping programs

Peace 4 Kids

Empowering foster and at-risk youth by providing community as family

Program Effectiveness Capacity Building Scenario with

SSG

Conditions that prompted Peace 4 Kids to engage in Capacity Building with SSG

1) Peace 4 Kids has an organizational philosophy of continuously seeking to improve

2) Concerns about the general funding climate in light of the economy

3) Leadership transition 4) Wanted to raise more funding and increase

competitiveness for funding 5) Potential new law with possible impact on

nonprofits serving foster care youth

Capacity Building Exercises Peace 4 Kids Realized with SSG

1) Developed Logic Models for programming that were specific to each age group.

2) Development of New and Revised Intake Application Forms for foster care youth

3) Created a Program Improvement Committee within our organization

Results of Capacity Building on Peace 4 Kids for Program

Effectiveness

1) Expanded age range of the foster youth served: Identified greater impact by targeting younger children

2) Submitted funding proposal to Dept. of Justice for mentoring program:

Better able to articulate why programs uniquely effective Organization more competitive for funding

3) New data collection and analysis process: Identified kind of information needed to demonstrate

results Staff trained on data collection and using

excel/spreadsheet software for data analysis

Long-term Impact of Capacity Building on Peace 4 Kids

Program Effectiveness: More strategically address target community’s needs

Program Impact: Track progress and direct programs for desired results

Program Funding: Capture and communicate results for more funding

Program Sustainability: Increased program effectiveness, ability to capture and convey

results increases sustainability

SSG Contact Info

Alexis Moreno 213.236.9395

[email protected]

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Executive Service Corps

of Southern CaliforniaStrengthening nonprofits through coaching,

consulting, and capacity-building provided by

experienced executives who volunteer

their services


• Over 120 volunteer executives – 80% business– 15% nonprofit– 5% government

• Serving over 150 local nonprofits each year• 30 years in Southern California• One of nearly 40 ESC affiliates across the US

ESC Business Model

Areas of Focus•Executive leadership development•Board development (today’s

focus)•Fundraising•Management consulting, e.g.:

– Strategic planning– Finance– Human resources– Operations– Etc

Value Proposition•Executive-level consultants•Volunteers, enabling affordable

pricing•Coaching modality of service delivery,

developmental approach to projects•Teams, therefore diverse expertise•Extensive training program (~30/yr):

– Best practices in nonprofit sector– Translating business expertise to

nonprofits (or large NPs to small)

Executive Service Corps Client Characteristics

• Existing nonprofits, government agencies, or established projects within an incubator/fiscal sponsor

• Customized approach enables us to work with most sizes and types of organizations, at all lifecycle stages

However . . .• Since culture change is usually involved, project needs

commitment of both executive staff and Board• Since our consultants don’t “do for,” org. needs to

have sufficient human infrastructure for coaches to work with

Executive Service Corps’Board Development

Services• Helps nonprofit Boards of Directors understand their

critical governance and leadership responsibilities (the latter appropriate to their organization’s lifecycle stage) and assists the Board in building the infrastructure and culture to promote successful execution of that role

• Provided as a customized consultation (generally 12 months) or as part of a cohort program with other nonprofits (CCF’s BLI is classroom instruction for the ED and two Board leaders along with individualized coaching)

St. Barnabas Senior Services

•one•two•three•four

•More than100 years•Serves >5,000 seniors annually•Several locations throughout 15-mile service area near downtown

•Award-winning leader & advocate•Programs include multipurpose center, cyber café, medical clinic, adult day healthcare, social work offices, six congregate meal sites

Goals of St. Barnabas’ Board Development

Project with ESC• To increase levels of engagement and commitment

among existing Board members (i.e., attendance at meetings, participation on committees, acceptance of “give or get” requirement, willingness to make funder introductions and assist with public relations)

• To strategically recruit new, quality Board members to better reflect population being served and to enhance connectedness to business and banking communities

What ESC Did WithSt. Barnabas

• Provided framework with timelines and milestones for identifying and prioritizing Board-related needs

• Offered guidance for increasing members’ understanding of their roles and responsibilities, as well as building their levels of commitment, engagement, and accountability

• Conducted regular coaching sessions with Board Chair and CEO – separately and together – to assist with developing strategies, creating tools, and supporting implementation

• Participated in meeting(s) with members to facilitate their learning

Results of St. Barnabas’ Board Development

Project with ESC• Helped cement relationship between CEO and newly

elected Board Chair• Strengthened Board capacity• 100% of members signed new Board commitment letter• 100% participation in Board retreat (incr. 50% over prior)• 100% active participation on Board committees• All achieved with zero attrition from Board members

(cont’d)

Results of St. Barnabas’ Board Development

Project Cont’d• Significant increase in meeting

attendance/participation• Created formal Board recruitment process• Have already successfully recruited new Board

members meeting gaps identified:– Ethnic representation– Banking industry representation– Funder connections along with willingness to solicit them on

behalf of SBSS (two new gifts so far)

Benefits of St. Barnabas’ Board

Development Project with ESCEnhancing sustainability through ensuring the organization will:

• Access the financial, intellectual, and social capital of its Board• Develop a culture of partnership between Board & executive

leadership• Make effective, efficient, and meaningful use of all its Board

members• Through collective critical thinking and analysis, be better

equipped to make vital decisions and meet future challenges• Build a community of support around a constellation of committed

leaders rather than one charismatic executive or Board chair

Organizations that Could Benefit from Similar ESC

ServicesAny organization seeking to:•Build its Board (whether starting up or changing to reflect new program requirements, scale, or reach)

•Clarify the Board’s role and focus•Increase the Board’s commitment and engagement in areas key to the organization’s success (e.g., fundraising, public relations, committee involvement, leadership/officer roles)

•Strengthen Board relations through enhanced communication (quality and frequency)

•Assess the Board Chair/chief executive relationship through a professional, sensitive process


of Southern [email protected]

Sharon Spira-Cushnir, [email protected]

http://www.escsc.org/



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Capacity Building Discussion

Q&A Session

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The California Community Foundation thanks you for your participation.

Please learn more about Capacity Building with your Philanthropy Team at CCF…

Contact: Terri Mosqueda

Director of Donor Relations and Grants Management213.452.6298; [email protected]

Taylor Mitchell Donor Relations Specialist

213.452.6208; [email protected]

www.calfund.org

Capacity Building for Nonprofit Organizations

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Transcript of Capacity Building for Nonprofit Organizations